Capital Gains Tax (CGT) Update – How You Could Save Up to R180,000 on Your Property

The 2026/27 South African Budget introduced an important change for entrepreneurs and growing businesses.

From 1 April 2026, the compulsory VAT registration threshold increases from R1 million to R2.3 million turnover over any 12-month period.

For many small businesses, this provides much-needed breathing room before VAT registration becomes mandatory, reducing administrative pressure while businesses focus on growth.

What the New VAT Threshold Means – The increase in the VAT threshold is particularly positive for small and medium-sized businesses.

Benefits include:

  • More time to grow before compulsory VAT registration
  • Reduced administrative pressure in early growth stages
  • Greater flexibility with pricing and cash flow
  • More time to establish proper accounting systems
  • Less risk of unexpected VAT compliance issues

This change is especially beneficial for industries where turnover can increase quickly, such as:

  • Construction and building contractors
  • Maintenance and trade businesses
  • Consulting and professional services
  • Small manufacturing and project-based businesses

Growth Can Happen Faster Than Expected

South Africa’s 2026/27 Budget has introduced a meaningful tax benefit for homeowners.

The primary residence Capital Gains Tax (CGT) exclusion has increased from R2 million to R3 million, creating a real opportunity for individuals to reduce — or even eliminate — CGT when selling their home.

For many taxpayers, this is not just a technical adjustment — it’s real money saved.

 
What Has Changed?

Key CGT updates include:

  • Annual capital gain exclusion increased to R50,000
  • Primary residence exclusion increased to R3,000,000
  • Capital gain exclusion at death increased to R440,000

The most important change for most people is the increase in the primary residence exclusion.

 
How Much Can You Actually Save?

Let’s look at a simple example:

Example:

  • Purchase price: R2,000,000
  • Selling price: R5,000,000
  • Capital gain: R3,000,000

Before (R2 million exclusion):

Taxable gain = R1,000,000

Now (R3 million exclusion):

Taxable gain = R0

Tax Saving Explained

In South Africa:

  • 40% of the capital gain is included in taxable income
  • This is then taxed at your marginal tax rate (up to 45%)

So:

R1,000,000 × 40% × 45% = R180,000

👉 You could save up to R180,000 in tax depending on your tax bracket.

Important: This Applies to Your Primary Residence Only

This benefit applies only to your main home.

It does NOT apply to:

  • Investment properties
  • Rental properties
  • Holiday homes

These properties remain fully subject to CGT (after the standard exclusions).

 

How to Reduce Your CGT Even Further

Beyond the R3 million exclusion, you can reduce your CGT by increasing your base cost.

 

Include in your base cost:

  • Purchase price of the property
  • Transfer duty
  • Legal and conveyancing fees
  • Bond registration costs
  • Estate agent commission on sale
  • Compliance certificates (electrical, plumbing, etc.)

Improvements That Add Value (Very Important)

You can also include capital improvements, such as:

  • Renovating a kitchen or bathroom
  • Adding an extension or additional room
  • Structural upgrades

👉 These increase your cost base and reduce your taxable gain.


What Does NOT Count?

This is where many people get caught out:

  • Repairs and maintenance (e.g. fixing leaks, replacing locks)
  • Routine upkeep

These do not qualify and cannot be used to reduce CGT.

Keep Proper Records (Critical)

If you cannot prove it, SARS will not allow it.

You should always keep:

  • Invoices for renovations and improvements
  • Transfer and legal cost documentation
  • Agent commission statements
  • Supporting documents for upgrades

👉 Best practice: keep a simple “Property File” with everything in one place.

 
Why Planning Matters

Most people only think about CGT when selling their property — and by then, it’s too late to plan properly.

With the increased R3 million exclusion, there is now a real opportunity to:

  • Reduce or eliminate CGT
  • Structure your property sale more efficiently
  • Avoid unexpected tax liabilities
 
Final Thoughts

This change is one of the more practical wins in the current Budget — but only if applied correctly.

The reality is:

  • Many taxpayers don’t claim everything they’re entitled to
  • Many don’t keep the right records

Both result in unnecessary tax.

 

Need Help?

If you are planning to sell property or want to understand your CGT position:

📞 WhatsApp: 082 061 2300
📩 david@smarteraccounting.co.za
🌐 https://smarteraccounting.co.za/

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